Whether conversion of soft drink concentrate syrup into soft drink is amount to manufacture or not?

PJ/CASE LAW/2015-16/3030

Case:-BHAGAT HALWAI AND CONFECTIONERS VersusCOMMISSIONER OF TRADE TAX, U.P.

Citation:- 2016 (331) E.L.T. 188 (All.)

Brief facts:- The applicant/revisionist is a dealer engaged in the business of purchase and sale of sweetmeats, namkins, liquid form of syrup and confectioneries. The applicant made purchases of synthetic soft drink concentrate syrup (hereinafter referred to as the syrup) from registered dealers inside State of U.P., by use of fountain machine, the said syrup was converted into liquid form by processing the syrup through carbon dioxide, which makes it consumable as soft drink. The applicant did not admit any tax liability on the said soft drink. The assessing authority proceeded to impose tax on the liquid (soft drink) obtained from fountain machine, being a different manufactured goods, accordingly, fixed the tax liability at the rate of 15% on self manufactured soft drinks. The appeals filed by the applicant before the first appellate authority and the Tribunal met with the same fate holding that the soft drink is a new commodity and hence taxable.
The question involved in the present revisions is as to whether fountain drinks sold by the applicant was rightly taxed being manufactured soft drink.
It is contended that the syrup was purchased within U.P., converted into liquid (soft drink) from syrup, such mixture of drink does not bring into existence any new commodity, further, the processing does not amount to manufacture under Section 2(e-1) of the U.P. Trade Tax Act.

Appellant’s contention:- Learned counsel for the applicant in support of his submission relied upon State of Maharashtrav. Mahalaxmi Stores [2003 U.P.T.C. 453 = 2003 (152) E.L.T. 30 (S.C.)], Panchalingal Carbonic Gas Pvt. Ltd. v State of Andhra Pradeshand Others [141 STC 161 (F.B.) (A.P.)].

Respondent’s contention:- none is appeared on the behalf of respondent.

Reasoning of judgment:- Manufacture is defined under Section 2(e-1) of the U.P. Trade Tax Act, as follows : -
“Manufacture, means producing; making, mining, collecting, extracting, altering, ornamenting, finishing, or otherwise processing, treating or adopting any goods; but does not include such manufactures or manufacturing processes as may be prescribed;”
The Supreme Court in Sonebhadra Fuelsv. Commissioner, Trade Tax, U.P., Lucknow [2006 NTN (Vol. 31) 1 = 2006 (206)E.L.T.29 (S.C.)], interpreting the definition of manufacture, observed as follows : -
“We may mention that, as noted above, decisions construing the word ‘manufacture’ in other statutes are not necessarily applicable when interpreting Section 2(e-1) of the UP Trade Tax Act. As stated above, the definition of ‘manufacture’ in Section 2(e-1) of the UP Trade Tax Act is very wide, which includes processing, treating or adapting any goods. Hence, in our opinion, the expression ‘manufacture’ covers within its sweep not only such activities which bring into existence a new commercial commodity different from the articles on which that activity was carried on, but also such activities which do not necessarily result in bringing into existence an article different from the articles on which such activity was carried on. For example, the activity of ornamenting of goods does not result in manufacturing any goods which are commercially different from the goods which had been subjected to ornamentation, but yet it will amount to manufacture within the meaning of Section 2(e-1) of the UP Trade Tax Act since an artificial meaning of ‘manufacture’ is given in Section 2(e-1). Hence, whether the commercial identity of the goods subjected to the processing, treating or adapting changes or not, is not very material.”
This Court in M/s. Kumar Paints and Mill Stores, Meerutv. Commissioner of Trade Tax [2009 U.P.T.C. 845], while dealing with paint after adding of colours, held that the base paint used in “Point of Sale” tinting system itself, is a paint irrespective of colourant being added to get a desired shade or colour. It is in the form of paint and possesses the basic ingredients and characteristics.
The Court relying upon Commissioner of Trade Taxv. M/s. Raj Deep Brothers, Agra [2009 U.P.T.C. 845], held as follows :-
“The base paint used in “Point of sale” tinting systems itself, therefore is a paint irrespective of colourant being added to get a desired shade or colour. It is in the form of paint and possesses the basis ingredients and characteristics. The tinting does not bring new or different product into existence. The base paint can also be used as paint.”
And in Paragraph 7 it was observed as follows : -
“7. It is settled law that while taking into consideration the definition of the word ‘manufacturer’ as defined in Section 2(e)(1) of the U.P. Sales Tax Act, the definition itself is very widely worded. However, every change, which is mentioned in the definition of the word ‘manufacturer’ does not amounts into resulting in a manufacturing activity only and unless the new commodity emerges, which is commercially different and has a distinct name, character or use or identity.”
Having heard learned counsel for the parties, they are of the opinion that the decision rendered by the Tribunal is lawful.
In the facts of the present case, there is processing, treating or adopting of the syrup and converting into soft drink after subjecting the syrup through carbon dioxide in a fountain machine. The commercial product is out come of a process to manufacture as defined in Section 2(e-1). Whether the commercial identity of the goods subjected to processing, treating or adopting changes or not, is not very material.
The revision is, accordingly, dismissed.
The question is answered against the assessee and in favour of the Revenue.

Decision:- Revisions dismissed.

Comment:-The analogy of the case is that ‘manufacturer’ does not amounts into resulting in a manufacturing activity only and unless the new commodity emerges, which is commercially different and has a distinct name, character or use or identity. In the present case, there is processing, treating or adopting of the syrup and converting into soft drink after subjecting the syrup through carbon dioxide in a fountain machine. Hence duty liability arises on manufacturing activity done by assessee.

Prepared by:- Monika Tak

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PJ/CASE LAW/2015-16/3030

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